News around BlackRock's ETF application, Grayscale's GBTC discount to NAV melting, BTC spot driven rally

What happened last week

We are nearing the end of a rather eventful week in crypto. A week ago, on the 20th October Bitcoin was trading at $29’750, it has since increased to the $34’200 it is currently trading at. The driver behind Bitcoin’s 14.8% surge is a series of news around Blackrock’s ETF application.

The Blackrock BTC ETF’s proposed ticker “IBTC” has popped up in the DTCC, the “Depository Trust and Clearing Corporation”, eligibility file. The IBTC ticker was temporarily removed from the list but later added again, which raised some eyebrows. Although the DTCC announced that this was standard practice, the news managed to convince the markets that it is a positive sign regarding the SEC’s pending ruling. SEC Chair Gensler has refused to comment on questions about when and how the pending Spot-ETF applications would get approached. The Grayscale-BTC (GBTC) has seen its discount to NAV melt to as little as 11.03%, the closest it has been to its NAV in almost 2 years. The rally was mostly spot driven but the liquidations of $630M, that were triggered on Monday 23. and Tuesday 24., likely contributed to BTC reaching its highest level since May of 2022. BTC-Options have seen a massive surge in Open Interest, reaching $24.16B Notional Value before its $4.5B October expiry from earlier today.

Our take

1.) Was this really news?

The DTCC has discounted the fact that it listed the IBTC ETF in their eligibility file as “standard practice” and said that this was not “indicative of regulatory approval”. This makes it hard to judge whether this eligibility should be taken as a sign of increased likelihood that the Blackrock BTC Spot ETF is at the gates. On the flipside, if this piece of news was enough to trigger a 15% rally, then the impact one can expect from official sources on the ETF topic is sure to leave its marks on the charts.

2.) Is the Spot-ETF the be-all end-all ?

BTC’s price action has once again demonstrated how sensitive it is to news on the spot-ETF topic, and while an approval of the application is a huge bull case in the short term, as well as a big legitimization in the world of finance, there are other things to look forward to, such as the 2024 Bitcoin halving. A rejection of Blackrock’s application would undoubtedly have a negative impact in the short term, however the absence of a BTC Spot-ETF (i.e. current state) itself should not suppress BTC value in the medium term.

3.) What about ETH?

This rally was as Bitcoin focused as it gets, the ETH/BTC ratio slipped by 3.65% and has arrived at its lowest level since June 2022. Conversely, Bitcoin dominance has climbed as high as 54.35%, it being the recent high in a general trend which started early September and the highest market share Bitcoin has held since April 2021, before the last bull-run. This is a trend which could be observed in previous cycles, BTC gaining market share by outperforming the rest of the market on the way up and subsequently losing some market share once altcoins start catching up. Whether it is Crypto’s market structure or the isolated impact of the ETF-narrative (most likely a combination of both) and especially when the spill-over from BTC to ETH and altcoins occurs is the Gazillion Dollar question.

4.) What’s the catch?

Crypto has performed both as a safe-haven asset and as a risk-asset before, which costume it decides to put on next is uncertain. The decreasing correlation to equity indices and increasing correlation to Gold can be interpreted as such that Bitcoin is in a transition from risk to safe-haven asset. However, for the largest part in the post-pandemic timeline Bitcoin traded in tandem with equity indices, in case the economic hangover decides to show up in 2024 or geopolitical tensions don’t cool down or even intensify, there are few scenarios in which Crypto does not suffer some of the consequences which traditional equities would.

The week ahead

Tuesday, October 31 2023

• Euro Area GDP Growth Rate Flash (Expected: 0.2% YoY)
• Euro Area Inflation Rate (Expected: 3.4% YoY)

Wednesday, November 01 2023

• U.S. JOLTs
• U.S. Fed Interest rate decision (Expected: No Change)

Friday, November 03 2023

• U.S. Non-Farm Payrolls (Expected: +172k Jobs)
• Unemployment Rate (Expected: 3.8%)